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In debt talks, failure is an option

11/12/12 08:00 AMUpdated 08/07/13 08:15 AM

In debt talks, failure is an option

Associated Press

President Obama and congressional leaders have about seven weeks until the end of the calendar year, at which point automatic spending cuts, which both parties oppose, will kick in, and all Bush-era tax cuts will expire. Policymakers seem to believe a debt-reduction agreement is still possible to avoid these measures, but it’s an uphill climb.

The dirty little secret, though, is plenty of Democrats seem to realize that a deal isn’t entirely necessary.

Sen. Patty Murray (D-Wash.) on Sunday said Democrats were prepared to allow the expiration of all George W. Bush-era tax rates if Republican lawmakers objected to raising taxes on the wealthiest.

“We can’t accept an unfair deal that piles on the middle class and tell them they have to support it. We have to make sure that the wealthiest Americans pay their fair share,” said Murray on ABC”s “This Week.”

Murray said one option would be to let the lower rates expire across-the-board and then return to the table next year with new talks on a tax-cut package.

Murray, who’s likely to become the new chair of the Senate Budget Committee, specifically said if Republicans fail to compromise, “[W]e will reach a point at the end of this year where all the tax cuts expire and we’ll start over next year. And whatever we do will be a tax cut for whatever package we put together. That may be the way to get past this.”

Quite right. It’s easy to imagine the talks collapsing before New Year’s Eve, and then President Obama proposing a new approach with the new Congress, focused on tax cuts for the middle class, and Clinton-era rates for income above $250,000. If it took a few weeks to pass, policymakers have the option of making it retroactive to Jan. 1.

It would get the support of the Democratic Senate, and if House Republicans balk, they’d be responsible for higher middle-class taxes.

Given this, Murray’s comments yesterday offer a reminder of why the pressure is on the GOP, and why the White House need not accept a bad deal. One side has leverage, it’s not the Republicans.